Fiscal Policy Shockwave: Indian Equity Markets Plunge to Six-Year Budget-Day Nadir Amid Tax Overhaul

The Indian equity markets experienced a severe contraction on Budget Day 2026, with the Sensex and Nifty 50 indices recording their most significant single-day declines in at least six years. This dramatic downturn reflects investor apprehension over proposed fiscal measures, particularly the increase in Securities Transaction Tax (STT) on futures and options (F&O) trading and the introduction of a novel taxation framework for corporate share buybacks. The market's adverse reaction underscores deep-seated concerns regarding the potential impact on trading liquidity, corporate capital allocation strategies, and overall investment sentiment. Analysis suggests that these fiscal adjustments, while aimed at revenue augmentation, may inadvertently dampen market participation and alter risk-reward calculus for institutional and retail investors alike. The pronounced sell-off signals a critical juncture for policymakers, highlighting the delicate balance between fiscal imperatives and capital market stability. Further monitoring of secondary market reactions and institutional flow data is warranted to assess the long-term implications of this regulatory shift on India's financial ecosystem.